What is the cost of producing cubic metre pine? What is the production function? These questions are challenges although cost accounting has been done for years However, the cost accounting is typically applied at the forest holding level. The life of an individual stand, for example, is too long to cope with. 

In case, the national forest inventory as well as stumpage price and cost statistics are accurate, return on forest ownership by tree species provides a proxy for economic results and comparison. The solutions are extensions of the return on forest ownership results in production for ten years in the statistical service at Natural Resources Institute Finland. The key challenges are the splits of the growing stock e.g. Between non-industrial private forests and the others, between tree species as well as splits of the costs between tree species. A method to split the wood production costs is hard to find. As a proxy, the costs were split using timber sale earnings. 

It turns out that the average returns 1983-2015 have 2.5% for pine, 3.1 for spruce and 2.6 for birch, spruce being the best choice. Surprisingly, with time period 1993-2015 the respective figures were 4.3%, 4.7% and 3.8% and with 1983-1993 negative because of the recession. The recent results of period 2003-2015 turn with 3.7%, 3.5% and 3.3% pine being the best choice. The standard deviations 10.6%, 10.1% and 10.0% hardly differ from each other. In all, spruce might be the best choice in case the sites suit for spruce. In all, the most dominating driver were price ups like in 2007 and lows in 1990s emphasising the well being of the forest industry.

Forest industrie hsave shares, bonds etc. on the public market place, use the International Financial Reporting Standards (IFRS), and for the accounting of the growing stock of their forests International Accounting Standard (IAS) 41 Agriculture (EU 2009, Herbohn & Herbohn 2006).The market based fair value (FV) is the starting point of the IFRS and IAS 41. The FV uses ‘the expected net cash flows discounted at a current market determined pretax rate if market determined prices are not available (EU 2009, Herbohn 2009). The FV recognises the changes both in stumpage prices and the growing stock, the last of which are based on the forest management plans (FMP). The FMP relies on and benefits from the long traditions of forest inventories, growth modelling, determining optima rotation, silvicultural recommendations etc. as well as FMP software using simulation and optimisation etc., all of which have been developed long before fair value accounting (FVA). The final felling happens in the North, say, after 80 years, which implies a certain ambiguity of the stumpage prices and discount rates.The paper summarizes work on this issue, preliminary ending with questionnaire based on interviews addressing IFRS practices ofScandinavian forest companies. First, different forestry accounting traditions have been reviewed (Hogg & Jöbstl 2008,Sekot 2007). Second, theoretical bases and consequences of the FVA have been discussed (Argiles et al. 2011). Third, the pros and cons of IAS 41 as documented in the scientific literature have been analysed (Ayanto 2011, Elad & Herbohn 2011). Fourth, the development of stumpage prices has been studied and summarised in the first interview question. Fifth, forest regeneration and other costs have been discussed as well as addressed by questions no two and three. Sixth, the use of this input information and the FMP are analysed and formulated as the fourth question (Penttinen & Rantala 2008, Penttinen et al. 2004). Seventh, the discount rate dilemma has been analysed and is reflected in terms of a que stion (Eckel et al. 2003). Even market risk and bare land accounting were inquired as well. Eight, the disclosure of the growing stock has been studied and addressed. Ninth, all closing of the books of the Scandinavian forest industries using IAS 41 have been analysed,covering the periods from 2009 to 2015 (Tornator 2016). The results document the use of discount rates from 5.5% to 7.5%. It is common practice to report the FV sensitivity with respect to the discount rate, stumpage price and silvicultural cost changes. The prices used are primarily medium term averages of several years, which have even been reviewed by the management and in some cases also by external experts. The typical forecasting period is ten years, and a simple price change percentage isa pplied thereafter, if any. Some companies estimate discount rates using weighted average cost of capital (WACC) in which the cost of equity capital is based on the capital asset pricing model (CAPM). Also in this context, external experts have been in volved in some cases. Risk free interest rate is typically derived from a Euro rate. The interest requirement of the equity capital is updated semi-annually and that of the debts quarterly. Young stands are valued at cost. According to the interviews, the application ofIFRS is a quite big but not an impossible burden. However, a comparison between different entities is difficult, because the standard does not provide any exact guidelines. The findings of the closing of the books and interviews are finally summarised and discussed.

Forest industries, which have shares, bonds etc. on the public market place, use the International Financial Reporting Standards (IFRS), and for the accounting of the growing stock of their forests International Accounting Standard (IAS) 41 Agriculture (EU 2009, Herbohn & Herbohn 2006). The market based fair value (FV) is the starting point of the IFRS and IAS 41. The FV uses ‘the expected net cash flows discounted at a current market-determined pre-tax rate’ if market-determined prices are not available (EU 2009, Herbohn 2009). The FV recognises the changes both in stumpage prices and the growing stock, the last of which are based on the forest management plans (FMP). The FMP relies on and benefits from the long traditions of forest inventories, growth modelling, determining optimal rotation, silvicultural recommendations etc. as well as FMP software using simulation and optimisation etc., all of which have been developed long before fair value accounting (FVA). The final felling happens in the North, say, after 80 years, which implies a certain ambiguity of the stumpage prices and discount rates.

The paper summarizes work on this issue, preliminary ending with questionnaire-based interviews addressing IFRS-practices of Scandinavian forest companies. First, different forestry accounting traditions have been reviewed (Hogg & Jöbstl 2008, Sekot 2007). Second, theoretical bases and consequences of the FVA have been discussed (Argiles et al. 2011). Third, the pros and cons of IAS 41 as documented in the scientific literature have beenanalysed (Ayanto 2011, Elad & Herbohn 2011). Fourth, the development of stumpage prices has been studied and summarised in the first interview question. Fifth, forest regeneration and other costs have been discussed as well as addressed by questions no. two and three. Sixth, the use of this input information and the FMP are analysed and formulated as the fourth question (Penttinen & Rantala 2008, Penttinen et al. 2004). Seventh, the discount rate dilemma has been analysed and is reflected in terms of a question (Eckel et al. 2003). Even market risk and bare land accounting were inquired as well. Eight, the disclosure of the growing stock has been studied and addressed. Ninth, all closing of the books of the Scandinavian forest industries using IAS 41 have been analysed, covering the periods from 2009 to 2015 (Tornator 2016).

The results document the use of discount rates from 5.5% to 7.5%. It is common practice to report the FV sensitivity with respect to the discount rate, stumpage price and silvicultural cost changes. The prices used are primarily medium term averages of several years, which have even been reviewed by the management and in some cases also by external experts. The typical forecasting period is ten years, and a simple price change percentageis applied thereafter, if any. Some companies estimate discount rates using weighted average cost of capital (WACC) in which the cost of equity capital is based on the capital asset pricing model (CAPM). Also in this context, external experts have been involved in some cases. Risk free interest rate is typically derived from a Euro rate. The interest requirement of the equity capital is updated semi-annually and that of the debts quarterly. Young stands are valued at cost. According to the interviews, the application of IFRS is a quite big but not an impossible burden. However, a comparison between different entities is difficult, because the standard does not provide any exact guidelines. The findings of the closing of the books and interviews are finally summarised and discussed

Large Finnish forest industry companies want to increase the size of their harvest-ing service enterprises after the extremely low industry production volumes in 2009. This has required harvesting enterprises to grow. However, profits in this small and medium size enterprise business have been low, especially since the 2009 downturn. Thus there has been only limited potential to grow organically. Other possibilities are to organise cooperation in the main - subcontractor base or to network to establish a limited company owned by independent entrepreneurs to make agreements with customers.

The harvesting enterprises and their growth opportunities were analysed by statis-tical methods using the tax authority data of about 1000 enterprises for the 2001–2008 closing of the books. The usability of all applicable ratios was tested, and results were produced in the form of tables and figures. The closing of the books data from 2008 was analysed, revealing interesting relations and eight independ-ent factors which describe success and failure factors. Recommended ratios were defined for the analysis of the whole wood-harvesting sector and for researching individual enterprises.

In order to respond to global competition challenges, the wood processing industry is outsourcing the planning of roundwood harvesting. This means that the industry seeks to negotiate with fewer, larger and more diverse harvesting enterprises, which may have smaller subcontractors. This kind of networking development has already occurred in other industries e.g. shipyards and the electronics industry. Poor profitability, the liquidity and solvency of the harvesting business and the consequent difficulty in hiring qualified operators make networking a complicated process. Moreover, the asymmetry of negotiation powers between industrial customers and harvesting entrepreneurs perpetuates the low profitability. A study of the harvesting business structure has been conducted to identify the problems and success factors in this industry. Financial data from the period 2001-2007 was studied applying ratio analysis, focusing on the profitability, liquidity and solvency of subgroups as well as the whole industry. Entrepreneurs need managerial skills and appropriate business tools to cope with the growing size of their enterprises. The traditional business model for a capacity supplier tends towards the co-operation business model, which results in enterprise networks with subcontractors. The results of this study show that economic resources for reorganising and developing the business are very limited. A quarter of enterprises make break-even results or losses. Larger enterprises have limited reserves.